Independent directors and institutional investors persuaded the Italian Government not to extend the facilitated approval of multiple voting rights

An unprecedented initiative was launched last month by a group of independent directors, aimed at blocking any attempts to extend the temporary exemption to the supermajority vote, required to approve the introduction of multiple voting rights. In few days, 140 individuals (academics, journalists, professionals and independent NEDs of more than 30 listed companies), 20 institutional investors (representing more than US$ 7.5 trillion of assets under management), and 9 advisers, including ECGS’s partners Frontis Governance and Manifest, signed an open letter to the Italian Government, the Parliament and market authorities. Many other investors expressed their intention to subscribe the letter, but they could not make the strict deadline. ICGN and the association of Italian asset managers (Assogestioni) also supported the initiative, sending a separate letter to the Government.

On February 5, only 3 days after the letter was sent, the Minister of Economy Carlo Padoan formally replied that the exemption period expired, and that the Government will not propose any extensions. A great result that proves that committed investors and (really) independent directors can work together to make changes happen.

A great result, but “surprises” are still possible

The law that allowed the deviation from the basic “one share – one vote” principle, also provided a temporary exemption to the supermajority vote required to approve all changes to the bylaws. Until January 31, Italian companies were able to approve the possibility to assign additional voting rights with a simple majority vote. However, only three companies (the large-cap Campari and the mid-caps Amplifon and Astaldi) took advantage of the exemption, even if none of them really needed the exemption to the supermajority vote as all have a controlling shareholder with more than 50% of shares.

Probably, the late amendments to Consob Regulation (Italian market authority) strongly contributed to discourage issuers from calling the EGM in January. Changes to Consob’s rules were necessary to govern relevant aspects of the additional vote, but the new rules were published only on December 19. Whatever the reason, the exemption to the supermajority vote had no significant results (probably not as originally expected by the legislators), and on January 29 Italian legislators proposed to extend it until the end of 2015. If the proposal had passed, almost all Italian listed companies would have had the possibility to approve the multiple voting rights, including Enel, Eni and Finmeccanica, of which the Government holds 30% of votes, enough to approve ordinary resolutions but not the extraordinary ones.

The proposal to extend the exemption period was related to an annual Government’s decree approved in December, the so-called “Decreto Milleproroghe” (literally “a thousand extensions decree”). The Decree must be converted into law by the Parliament within 60 days from its publication i.e., within February 21. Despite the Minister’s reassurances, it cannot be excluded that some members of the Parliament may be interested in re-including the extension during the conversion process, maybe the same members that included the exemption in the law approved in August.

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